The Euro jitters are back. As The Telegraph finance columnist Jeremy Warner put it after the Italian election failed to produce a decisive result last week: ‘Hold onto your hats. It's about to get interesting again’.
Not that events in Italy surprised many. Just the other week Financial Times columnist Martin Wolfe penned a piece entitled, 'Why the euro crisis is not yet over'. Meanwhile, The Economist'sCharlemagne blog has been predicting further turmoil for a while as it has charted concerning developments not just in Italy, but also in other member states such as Spain and France.
In broad terms, what all this means for Europe and the UK is uncertainty. Despite our separate currency, this country's economic fate is inextricably tied to that of our biggest trading partner. And uncertainty inevitably leads to a slowdown in the transactions that make an economy function. This obviously affects corporate lawyers.
As Tony Williams, the former managing partner of Clifford Chance, who now heads up legal consultancy Jomati, explains: ‘Lawyers rely on activity. What hurts them isn't boom or bust, but market paralysis’.
The slowdown in deal flow from the last wave of Euro jitters is one of the factors behind some of the recent high profile job cuts, office closures and staff relocations that have taken place over the last few months in the legal world. This process has seen a notable – if not transformative – scaling back of mainland Europe operations at some firms.
However, the consensus is that while Europe is down, it's far from out. Indeed, a report from data provider Mergermarket shows that there was a surge in European mergers and acquisitions in the fourth quarter of 2012, with volumes up by 5.4% and value up by 88.9%. Much of that activity was fuelled by companies in emerging markets and the US which look at Europe as a good deal right now.
Lawyers believe this trend is likely to continue, with Cleary Gottlieb Steen & Hamilton London corporate partner Michael McDonald telling Legal Week earlier this month that ‘Certainly, there will be activity in the Eurozone in 2013’. He added: ‘But a significant portion of the M&A work of any size will be inbound to Europe, consisting of acquisitions by US corporates and emerging market corporates, particularly from the BRIC [Brazil, Russia, India and China] countries’.
It's not just international corporates that are looking on Europe favourably, but international law firms too. Specifically, US law firms. This group is keener to invest in London than ever, viewing the current economic conditions as ideal for eating into the London market share of its UK rivals. In this respect, there are two key factors working in US firms' favour. One is their sheer size - it's often overlooked that 40 of the largest 50 law firms globally by turnover are American. Supported by the relative health of the US market – which has recently been buoyed by a host of ’mega-deals’, capped by Warren Buffett's $28bn (£18bn) acquisition of food giant Heinz – this enables them to fund expansion at a time when many UK law firms are on the back foot.
A second factor is the strength of the US dollar relative to the pound. After the UK economy lost its triple A credit rating, Sterling fell to its lowest level for nearly three years. This means US law firms' money is going further in fuelling their UK expansion. Accordingly, we may see more new training contract programmes launched by US law firms in London over the next few months, following the likes of Gibson Dunn, Greenberg Traurig Maher and Sullivan & Cromwell.
With US law firms traditionally paying their new recruits higher salaries than their British counterparts – mainly because of higher law school debt Stateside – the money offered by these firms is often eye-catching.
It's worth remembering, however, that these firms' London operations are often still pretty small, meaning they only take on two or three trainees each annually. Compare that to the approximately 100-strong intake of a typical Magic Circle law firm every year. Having said that, there are a few US law firms with substantial London offices, with White & Case and Baker & McKenzie boasting in excess of 300 lawyers in the UK capital.
Amid all this change and jostling for position, future corporate lawyers have to grapple with the difficult decision of which path to follow. Do they swot up on Asian languages and culture in a bid to make themselves more attractive to the raft of UK law firms looking East right now? Alternatively, should they try to get a foothold in London with an expanding US firm, then hang on until the European storm subsides? Or do they take some time out and look to improve their CVs?
Those minded towards the latter option should keep an eye on the EU's new Erasmus For All programme – which is aimed at expanding the popular university ERASMUS year abroad to graduate students. Ongoing negotiations to re-apportion a major chunk of public funding to the scheme could see graduates offered European Union-backed loans of around €12,000 (£9,600) to do Masters degrees in other European countries. A portion of funding will also be reserved to help students study further afield in locations like China and Brazil. Anyone interested can find more details here.
In the meantime, prospective lawyers should try not to let all the uncertainty get to them and keep scouring the horizon for opportunities. They are out there for the ones who look.